COVID-19 business interruption insurance litigation is certainly heating up. On July 14, 2020, a Pennsylvania federal judge declined a summary judgment motion filed by the insured, Windber Hospital, against Travelers Property Casualty Co. of America (“Travelers”), the insurer (see Winber Hospital, et al. v. Travelers Property Casualty Co. of America, case number 3:20-cv-00080, in the U.S. District Court for the Western District of Pennsylvania). Travelers, however, isn’t off of the coverage hook just yet. The court noted that it would be premature to declare that the insured’s “loss of use” of buildings and facilities resulting from COVID-19 state-mandated closures is a covered physical loss under the policy. Rather, the court noted it would wait to determine the ultimate issue—whether the loss of use due to the closures amounts to physical loss under the policy—until it has fully considered certification of the putative class.
The insured filed a proposed class action in April of 2020 claiming that Travelers wrongfully denied coverage for its losses as a result of the COVID-19 pandemic and government shutdown orders. The class was filed specific to Travelers. The insured argued that the virus exclusion (written about previously here, the article can be found here) should not apply because it refers only to virus-related “loss or damage” but not to business expenses. The argument follows that coverage for business expenses (like paying rent, a mortgage, or wages to employees) is not barred by the virus exclusion. The insured further argued that “[t]here can be a physical loss of a building without there having been a physical alteration of the building. It is enough that there has been a loss of use of the building.”
In the motion for summary judgment, the insured argued that the court should read the policy in favor of the policyholder because the terms of the policy are ambiguous and the insured offered a reasonable interpretation of those terms. In response to the motion, the judge explained that “Plaintiff’s motion asks the court to rule on the merits of plaintiff’s claims such that it could provide offensive, nonmutual estoppel to members of a proposed class that has not yet been certified…To avoid potential unfairness to defendant by ruling on the merits of plaintiff’s claims without a certified class, the court will defer ruling on the motion for summary judgment until after the court has ruled on the motion to certify a class.”
Of course, the key issue in all COVID-19 business interruption insurance litigation will be whether and to what extent the virus causes “direct physical loss or damage” such that coverage is triggered. This issue will be extensively briefed and considered by courts across the nation.
Our lawyers continue to keep a close eye on the rulings of courts across the nation on these hotly contested issues.
The lawyers of LeMaster & Ahmed PLLC are here to help businesses nationwide present the best available arguments for business interruption coverage related to COVID-19 business income and extra expense losses. Contact us at our Houston location at 832-356-7983 or our DFW location at 972-483-0410. You can also message us any inquiries directly on our website.
***The foregoing is not meant to serve as legal advice relating to your insurance coverage issue. Please contact one of our lawyers if you have questions specific to your particular insurance issue.